Commentary: Big gamble to ensure that Windows Phone lives

SAN FRANCISCO (MarketWatch) — With Microsoft Corp.’s $7.2 billion deal to finally buy Nokia Corp.’s mobile phone business, retiring CEO Steve Ballmer is putting what may be his last imprint on the software giant.

Whether Microsoft’s
MSFT, +1.27%
competitive position in the smartphone arena will improve by acquiring its main hardware partner is the big question. But Ballmer, who is stepping down as chief executive within the next year, appears to be putting into place the final peg in his strategy of “devices and services” in the hopes this vision is carried out. In fact, the deal assures that it will be nearly impossible for Ballmer’s replacement NOT to pursue this strategy.

Nokia no more with Microsoft deal?

(4:31)

Microsoft is acquiring nearly all of Nokia's mobile business in a $7.18 billion deal. What the purchase means for the tech world.

Translation: Other smartphone makers are not really adopting Windows Phone, so we had to buy Nokia to make sure that someone was building phones for the software.

Nokia
NOK, +0.44%
is Microsoft’s biggest customer for Windows Phone. In the second quarter, it accounted for about 82% of Windows Phone shipments. But while Microsoft has clearly become the No. 3 player to Apple Inc.
AAPL, +1.93%
and Samsung Co. Ltd.
005930, -0.56%
its overall share is sparse. According to Gartner Inc., Microsoft’s Windows Phone had 3.3% of the worldwide smartphone market in the second quarter, based on sales of operating systems.

The deal will also likely dissuade other hardware makers from licensing Windows Phone in the future, though only Samsung and HTC had elected to make devices for the platform — and Android remains their platform of choice.

The other interesting twist in this deal is the fact that Nokia CEO Stephen Elop will be coming back into the fold, where he is expected to stay on as head of the devices business. The former Microsoft executive’s name has been mentioned as a possible candidate to replace Ballmer. Whether this means Elop has the inside track for the job is now anyone’s guess.

Will Microsoft survive and thrive in smartphones with Nokia’s handset business under its wing? Or will this deal be remembered as Ballmer’s last stand in an attempt to push Microsoft beyond PCs with a bad ending, like Lieutenant Colonel George Custer’s final battle? Only time will tell, and much will depend upon whom Microsoft eventually names as its new leader.

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